Cash cheese prices hit record highs

Cash cheddar cheese prices are record high due to world demand for dairy products and China's strong imports of whole milk powder. That demand also has milk powder and butter prices at elevated levels.

Cheddar cheese cash prices on the CME continued to push higher last week, setting a new record high of $2.36 a pound for blocks and $2.32 for barrels. Those prices were up 5 cents and 4.5 cents, respectively, from the previous week and 13 cents and 11.75 cents higher, respectively, than two weeks previous.

Block cheddar broke through the old record of $2.28 a pound set in May 2008 on Jan. 23 and has increased almost every day since, said Jerry Dryer, chief market analyst for Rice Dairy, a Chicago brokerage firm.

Prices are being pushed by strong Chinese demand for whole milk powder, he said.

“That demand is very pervasive; it goes across the whole (dairy) category,” Dryer said.

Whole milk powder consumes both fat and non fat solids, and China’s demand is also keeping nonfat dry milk powder and butter prices elevated. Prices are up across the board, he said.

CME cash prices for nonfat dry milk settled at $2.04 a pound last week, and butter settled at $1.88 a pound.

Demand for dairy products is strong, U.S. exports are good, foreign buyers are now used to coming to the U.S., and the U.S. is the only country with cheese to sell, he said

New Zealand put a hold on its cheese production to keep China supplied with whole milk powder, and cheese demand in Europe and Russia is up, although Russia won’t buy dairy products from the U.S., he said.

China and Russia are having problems with domestic milk production, and Europe did as well until increasing production in the third quarter of 2013. The EU’s increased production seems to be finding a home and product inventories need rebuilding, he said.

“The cheese market is running out of fresh cheese. Every day, buyers are going to the spot market,” said Sarina Sharp, market analyst with the Daily Dairy Report.

But sellers aren’t bringing much cheese. There are more buyers than sellers, and that pushes up prices, she said.

The U.S. is exporting a lot of cheese on orders placed a couple of months ago, but those exports will likely slow down due to current prices, she said.

U.S. dairy product prices have been rising for months and are now at record highs and converging with prices in the EU and New Zealand. They’ve been catching up with global prices, and cheese is now on par with world prices, she said.

High milk powder and butter prices are also largely due to exports. Both domestic and foreign demand for butter is great, and manufacturers have not been able to build inventories. Powder demand in Southeast Asia and Mexico is strong, and New Zealand has not been able to supply all of Southeast Asia’s needs, she said.

U.S. dairy product prices are at or near the top, but have staying power at or near current levels, Dryer said.

Cheese and nonfat dry milk prices have the potential to stay above $2 a pound for several weeks. If the market decides to correct, those prices could fall 20 cents a pound or more, but it would be a short-term correction, he said.